The main purpose of this International Accounting Standard (which is now being categorized as IFRS 1, its latest version has been published at 1st January 2013) is to provide guidelines to Financial Accountant regarding presentation of Financial Statements. It provides guidelines about structure of financial statements and minimum content that should be reported as essential components of financial statements.
Number of Financial Reports that in total make a complete set of financial statement as per this international accounting standards are:
Statement of financial position at the period end (Balance Sheet)
Statement of income statement for the period (profit and loss) and other comprehensive income
Statement of changes in equity for the period
Statement of cash flows for the period
Notes to accounts stating summary about accounting policies followed when preparing financial statement and explanation regarding material items of financial statements
A statement of financial position of comparative period, where an entity presents its financial statement or items of financial statement on retrospective basis.
The aim of this IFRS is to ensure compatibility of financial statements on entity`s with its own financial statement as well as financial statement of other entities. If not compatible, analysis, interpretation and comparison will not be easy for different users of financial statements.
This is required that an entity must show disclosure as per IFRS only if all the requirements on IFRS are being fulfilled.
Assessment for going concern should be made by entity`s management when stating values of items of financial statement. All uncertainties and events pertaining to going concern status shall be clearly disclosed in notes to accounts.
In case any change is made with respect to accounting policy of underlying transaction in financial statement, amounts of comparative period shall also be adjusted unless not practicable.
IFRS do not require off setting of asset and liabilities without any reasonable evidence of the situation requiring this.
Preparation of profit and loss statement along with a separate section of comprehensive income is required. As per the rules of IAS 1 all income and expenses of the respective period should be matched with profit and loss of same period.
IAS 1 was first developed in 1997 by international accounting standard committee and this was later adapted by International accounting standard Board in 2001. This is the first standard giving detail guideline about the format and content of financial statements and these are applicable to all financial statements based on the rules of IFRS.